U.S. spending more to buy foreclosures

IRMO, S.C. -- Tucked into the economic stimulus package signed by President Barack Obama this week was $2 billion to expand a nascent and controversial program to help cities and states buy and fix up foreclosed homes.

Last month, the Department of Housing and Urban Development signed off on hundreds of grants to all 50 states totaling almost $4 billion. The Neighborhood Stabilization Program, as it's known, was passed last year as part of a housing rescue plan that was regarded at the time as the most significant housing legislation in a generation.

But critics have assailed the program for the lack of money it will send some hard-hit communities, a dearth of oversight and the discontent stirring among residents who want a say in what happens to their neighborhoods.

"What houses are gonna be involved? We still don't know that and we're a month away from the funds arriving," said Mike Aaron, president of the Livingston Avenue Area Commission, a group in a foreclosure-ridden area of the Columbus, Ohio. "That's what's making us uneasy right now."

The total amount coming into Ohio, for example, is $258 million, and Columbus is getting $23 million of that. Those figures do not include new money from the stimulus package and HUD has said it has not yet decided what the guidelines for the new grants will be.

Aaron said Columbus has rebuffed his group's attempts to talk about the best ways to use money, which has already been awarded to the state.

"We need to be involved in the process," said Aaron, who is pressing for an oversight board comprised of city officials and residents.

And then there's back biting about who gets how much.

The first round money is being divvied up based on the number and percentage of foreclosures, number and percentage of homeowners behind on their mortgages, and the concentration of subprime mortgages.

While the formula sounds fair, some of the results aren't. California and Florida are both getting more than $500 million in federal help, even though California has 500,000 foreclosures — around twice the number as Florida.